"And I like large parties. They're so intimate. At small parties there isn't any privacy."Every place that I checked to get that quote had a bunch of people who totally misunderstood it, so at the risk of killing the joke, here's what she means. In a large gathering, each person's spotlight of attention is diffused over so many people, that no single person feels like they're being intently focused on by most attendants, let alone by all of them.
Jordan Baker in The Great Gatsby
This feeling of not being watched by most or all others lets two people take their interaction wherever it wants to go, without having to freeze in place every time someone else's spotlight jerks over toward them, anxious about how they're being perceived. Large parties make for those "I Think We're Alone Now" kind of interactions.
Small parties work the other way, where each person may be fairly focused on all the others -- on some more than on others, of course, but still there's not that feeling of being able to slip away from the watchful eye of The Group, nowhere where two people could just talk about or do whatever without being noticed by others. This puts people more on their guard at small parties.
In a healthy world, people go to both large and small parties, enjoying the good parts of each, and putting up with the bad parts as a necessary cost. But sometime over the last 20 years, we've returned to the mid-century era of relying mostly on small gatherings, unlike the earlier large-party atmosphere of the Jazz Age, and also unlike the larger-scale shindigs from the days of Beach Blanket Bingo, Animal House, and Weird Science.
The nightclub craze of the Roaring Twenties and the Go-Go Eighties is also long gone. In low-trust periods, people just don't feel comfortable being surrounded by so many strangers in such an unprotected space. It's not only that people in such periods are less promiscuous and have lower sex drives, since you could always go out dancing with your steady partner or group of friends. They just feel awkward in public spaces, so nightclubbing becomes a fringe activity.
At small parties, though, there's no carnivalesque feeling that all barriers have been removed between groups and individuals, so to low-trust people it feels safer. There are probably no more than five separate little groups of friends, and since each group knows the hosts, they aren't that far apart in social distance. To the low-trust person, knowing that some unknown group comes pre-approved by mutual friends eases the interactions between strangers.
In an old post I excerpted a party scene from Time's original article on the Silent Generation, which unfortunately is no longer free online. It sounds pretty familiar, a rather small gathering where nothing too wild takes place. The attention-whoring described is not surprising given how self-conscious the average person will be in a small party, yet where there's an understanding that something unusual should happen.
It's like how everyone pretends to be fascinated by the boring game of beer pong that they're watching. If they respond to it like they should, by ignoring it and talking about or doing something fun with another person, the intense spotlight of small-party groups will train itself on them, to remind them that we're all here to watch beer pong, so don't kill the mood, bro. Kids are so conformist these days.
It's not as though young people in the good old days lacked group activities where everyone got together to pump themselves up as a group, rather than pair off and wander here, there, or anywhere. Sports games are only the most obvious example, and fans were much more rabid during the '20s and the '80s. But they also held their own events where, within an atmosphere of groupiness (those inside vs. outside the party), anyone could still find their own hidden little place, away from prying eyes. They enjoyed a healthier balance of event types.
I still stand by two older posts about how boring the typical Millennial house party is (and that episode was from Halloween, no less), and how beer pong reflects anti-social trends. And after a brief resurgence of nightclubbing during the mid-2000s, its appeal to young people keeps falling. Now, even when they do go out, it's mostly to whore for attention if they're female, and if male, to stare at "hot chicks" without making a move. No one's in any danger of making a connection.